Advantages and Disadvantages of Bankruptcy

Any wages earned and property acquired after the bankruptcy filing date (except for inheritances) are not subject to claims by the bankruptcy court or creditors.

There is no minimum amount of debt required to file a Chapter 7 bankruptcy case.

A Chapter 7 bankruptcy case is often concluded within 90 to 120 days after the date of filing, thereby enabling you to obtain a fresh start and move beyond the burden of your debts relatively quickly.

Disadvantages of a Chapter 7 bankruptcy filing:

Any non-exempt property is subject to liquidation by the trustee.

Some debts survive the bankruptcy, e.g., and can be collected after your case is closed.

Chapter 7 does not cancel secured debts and, if facing foreclosure or repossession, such efforts by the lender are only temporarily stalled by the bankruptcy filing.

Co-signors of a loan remain liable on the debt unless they likewise file for bankruptcy relief or reach a resolution with the creditor.

A debtor may only file for Chapter 7 bankruptcy relief once every 8 years.

Bankruptcy impacts your credit rating.

It is difficult to voluntarily withdraw from a Chapter 7 bankruptcy filing.

Advantages of a Chapter 13 filing and payment plan:

You generally are able to keep all of your property, exempt and non-exempt.

You are afforded a longer period of time to pay your debts than if the bankruptcy had not been filed.

Debts that are not permitted a discharge in a Chapter 7 case can be reduced in a Chapter 13 bankruptcy.

You are afforded protection against creditors’ collection efforts and wage garnishment efforts.

Any co-signors are not subject to collection efforts of the creditors so long as a Chapter 13 Plan provides for full repayment of the debt.

You are protected against foreclosure by your mortgage lender while making timely payments under the Plan.

A Chapter 13 bankruptcy may be filed after a Chapter 7 discharge to pay off any remaining liens.

You may file a Chapter 13 bankruptcy more frequently than permitted under Chapter 7.

Creditors are separated by classification and receive different percentages of payment.

Disadvantages of a Chapter 13 bankruptcy filing and payment Plan:

Plan payments come from the debtor’s disposable income (i.e., that amount which remains after expenses are deducted from income) which restricts your cash over the repayment period of the Plan.

Some debts may survive after the bankruptcy is closed for which you must continue paying.

The legal fees associated with a Chapter 13 bankruptcy are higher than under a Chapter 7 filing due to the increased complexity. Your debts and repayment Plan can linger for years, thereby burdening future income until Plan completion.

There is a limit on the amount of debt liability when filing a Chapter 13 bankruptcy. Currently, unsecured debt may be no greater than $383,175, while secured debt must be less than $1,149,525. These amounts adjust every three years, with the next adjustment taking place April 1, 2016.

We do not do everything, but we have a large network of trusted professionals who we work with.

The Supreme Court of Illinois does not recognize certifications of specialties in the practice of law and the certificate, award or recognition is not a requirement to practice law in Illinois.

The information on this website is for general purposes only and should not be interpreted to indicate a certain result will occur in your specific legal situation.

The information on this website is not legal advice and does not create an attorney-client relationship.

Any third party awards and recognitions described, listed or displayed on this site are not intended to be representations by the Drendel & Jansons Law Group or the attorneys in the firm, but are simply evidence of our acknowledgement and acceptance of those awards and recognitions for which we have been nominated by third parties based on whatever criteria they have used.